Wednesday, November 01, 2006

Earnings Fade into Distant Memories

It’s a bloody start to November. Earnings surprises continue to be on the upside but the bulk of S&P firms have now reported – as of last Friday 74% of 304 S&P firms had beaten the Street consensus. The earnings season really concludes this week so the attention of most investors shifts from earnings to economic indicators.

Now any bearish indicator is bound to spook investors. Today is a harbinger of things to come if indicators don’t hold up. The Nasdaq gives up 1.37% of the impressive 4.79% gained last month while the Dow heads south for the fourth straight session. Participation is strong as consolidated volume reaches almost 5 billion shares.

However, the killer chop could be Friday’s payroll numbers. If the numbers fall way below expectations the bulls will need to dive for cover.

ADBE stumbles into negative territory for the first time since I bought it. Not to worry. ADBE will definitely regain its footing in the quarters ahead as its slew of new products hit the market.

Only MSFT and SLV are spared in today’s market rout. SLV, just like gold, often benefits whenever the dollar weakens or is forecast to weaken; when the economy is slated for a slowdown; or when the oil price rises. Since the first two scenarios are all but guaranteed going forward, I expect SLV to trend upwards into much of 2007.

I suspect MSFT continues to defy gravity on expectations of the releases of Vista, Zune, Office, Server,..............

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